Pension's S.1783 update and Tax Reform Recommendations due 11/1/05

[papau]

The October 18th the Tax Reform Advisory Panel decided to send a report to the Treasury Department on November 1st that includes both personal and corporate "reforms" and specifically in the savings area will include:

1. Eliminate exclusions for all but very few employer-provided fringe benefits (health insurance exclusion would be capped at $11,500 family $5,000 individual).

2. There will be three (3) savings account vehicles that the Panel suggests stay together as a cohesive plan:

.....a) "Save at Work Accounts" -- replaces all current employer provided plans, changes the default rules to allow for auto-enrollment, auto-growth, auto-investment, auto-rollover), and simplifies non-discrimination rules.
.....b) "Save for Retirement Accounts" -- replaces all current accumulation accounts outside the employer system, including deferred compensation, cash value life insurance, IRAs and annuities. The new accounts would allow individuals to save $10,000 annually. These accounts could only be used for retirement, no other purpose.
.....c) "Save for Family Accounts" -- replaces (HSA's, 529's, Coverdells and FSAs) and would allow indivdiuals to save $10,000 annually. These accounts would have no income caps and have limited withdrawal opportunities: education, purchase of primary residence and retirement. $1,000 a year could be withdrawn for any purpose.

The current edge that life insurance and annuities have over other financial services products (with regards to inside build-up) would be completely lost.

Also no "Pension Bill" -(beyond a possible increase in the PBGC premiums employers pay for Defined Benefit Plans - the only pension plans worth having, IMHO) will go forward until such time as current write-up of the bill (S. 1783), and the amendment requested by the business community that DeWine and Mikulski (D-MD) had planned to introduce that would have smoothed required pension plan funding requirements by increasing the period over which interest rates were smoothed (for contribution calculation purposes) and not using credit ratings to determine companies' pension obligations, are discussed/agreed too. With the Senate now not acting, it is unlikely the House will take up a pension bill either. Statements on the Senate floor saying this means the pension bill being dead may, or may not, be true.

[sinkingfeeling]

1. I hope all of those RWers making about $35000 a year read this

real closely. Exactly how are families to put $10K into savings, $10K into their retirement, money into accounts for college, and pay for their health insurance? The 'ownership' society is only for those in the $350K and up income brackets.

[papau]

2. Not that the GOP are the party of the rich - and that excluding investment

income has nothing to do with "savings" (study after study shows no new savings - just a transfer from taxable to untaxable), and everything to do with not taxing the rich.